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RATING/UNDERWRITING Understanding Rating and Underwriting the NFIP Policy
(Using the latest Flood Insurance Manual)
How Floodplain Management and Mapping Determines the Flood Insurance Rate
Who rates the premium ?The Write Your Own (WYO) Insurance CarrierThe Insurance Agent The Insurance Agency (Assigned Agency Associate/Office Manager/Agent)
Not the NFIP Insurance Specialist !!!“It’s a liability issue”
How is the policy rated?
•Electronically (plug in the Floodplain facts)
•Manually (“RATE” section of Flood Insurance Manual)
3 NFIP Policies The Dwelling Form
The General Property Form
The Residential Condominium Building Association Policy (RCBAP)
Know Your A, B, C and D’s Property Coverages
Coverage
◦ A Building Property (Structure)◦ B Personal Property (Contents)◦ C Other Coverages (Debris Removal, Loss Avoidance)◦ D Increased Cost of Compliance (ICC)
Rating Information Needed
1. Pre or Post FIRM2. Zone3. Occupancy (1 to 4 Family)4. Building Type5. Basement6. Elevation Difference
In the “ZONE” V No BFE, Mandatory
VE BFE, Mandatory
A No BFE, Mandatory
AE BFE, Mandatory
AH Ponding, BFE, Mandatory
AO Sheet flow, No BFE, Mandatory
AR BFE in process, Mandatory
AR/AE…Dual… Mandatory
X (B,C) No BFE, Not Mandatory
D Unstudied, Not Mandatory
Where is my BFE?
A Floor you walk on
--X-- No Compliance Rules
V Lowest member
FREEBOARD
OCCUPANCYSingle Family2-4 FamilyOther ResidentialNon-Residential BusinessOther Non-Residential
Building Type1 Floor
2 Foors
3+ Floors
Split Level
Mobile Home on Foundation
Basement or Enclosure? (None, Finished, Unfinished)
Breaking Down the PolicyPersonal Information
Rating Data
Premium Calculation
Personal Information
Rating Data
Premium + Fees
COMMUNITY: Zone, Mapping, GF’d, Compliance,...BUILDING: Type, Basement, Primary, SRL,… CONTENTS: Below/Above ground level?...Construction: Date, Mfg’d Home, SI,… Elevation: Post/Pre FIRM, Zone, EC, Bldg. Diagram,
BFE, LAG,…
Calculation Scenario$100,000 Structure / $25,000 Contents
Post FIRM AESingle Family Primary1 FloorNo BasementElevation +2.5’CRS “Class 8”
Premium Calculation $100,000 Structure / $25,000 Contents
EMERGENCY PROGRAM
BUILDING COVERAGE
REGULAR PROGRAM
Basic Insurance Limits Additional Insurance Limits
Total Insurance Limits
Single-Family Dwelling $ 35,000 $ 60,000 $190,000 $250,000
2–4 Family Dwelling $ 35,000 $ 60,000 $190,000 $250,000
Other Residential $100,000 $175,000 $325,000 $500,000
Non-Residential $100,000 $175,000 $325,000 $500,000
CONTENTS COVERAGE
Residential $ 10,000 $ 25,000 $ 75,000 $100,000
Non-Residential $100,000 $150,000 $350,000 $500,000
$40,0
00
$60K / $40K = $100,000
Question Where to research an NFIP Community in Emergency Program ?
The Community Status BookGOOGLE: fema status book
Premium Determination$1,000 $1,000
$100,000$25,000
$60,000 .32 $192 $40,000 .08 $32$25,000 .38 $95
$0$0
$224$ 95$319
$5$324
10
15
$ 25$ 50
$ 32$292$ 44$336
$411
Premium
Fees
The FREEBOARD Difference
Basic Premium at 3’ BFE VS. Basic Premium at 0’ BFE
S: $224.00 per year $1,298.00 per year C: $ 95.00 per year $ 245.00 per year T: $324.00 per year $1,548.00 Per year Annual Savings at 3’ FREEBOARD = $1,224 ($102/MO) Savings to life, limb, property = Compliance Measure “Priceless”
Benefit-Cost Comparison FREEBOARD
Incorporating freeboard into new construction is extremely cost effective. The up-front costs are generally only about 0.25 to 1.5 percent of the total construction costs for each foot of freeboard. However, the long-term savings on flood insurance will more than offset these costs.
For example, adding 2 feet of freeboard to a new home might add $20 a month to the mortgage payment, or $240 per year. The resulting flood insurance savings could be more than $1,000 a year for a building in Zone AE (for instance, in a riverine flood zone not affected by wave action) and $2,000 a year in Zone VE.
Many States and communities have incorporated freeboard requirements into the elevation and floodproofing requirements stipulated by the NFIP. Freeboard requirements can range from 6 inches to 4 feet, and it would be up to the community to decide what is most appropriate given their location and other community conditions.
Effective April 1, 2015, a $10,000 deductible is available for residential properties, and this option must be clearly disclosed to the applicant.
40% Decrease at Insured’s “Option”
April 1, 2016 RATE ChangesUpdates to
Flood Insurance Manual
http://www.fema.gov/media-library/assets/documents/115549For April 1, 2016
2016 Flood Insurance Manual